The Ways to New

Chapter 1Disruption and the Innovation Deficit

The Innovation Deficit

Newspapers and business books have long focused on the digital revolution: on the start-up phenomenon, on the rise of nanotechnology and biotechnology, on scientific breakthroughs such as in health care. Innovation, it seems, is everywhere. But the few truly innovative corporations that have come into existence hide the facts. People lump them together with the rest of the industry, over which they may cast a rosy halo. The truth is that many companies, especially those born before the digital revolution, are proving unable to innovate fast enough.

The problem is in the implementation. Research and development guidelines often seem too conventional. They limit rather than open up possibilities. Many companies are hostages to management systems, schemes, and procedures set in stone. You only need to look at the insufficiency of their organic growth.

A.G. Lafley, Procter & Gamble's former chief executive officer, has made a list of all the innovations launched by his company in the last decades, carefully distinguishing between incremental and disruptive innovation.¹ The latter are a minority but they generate more profit than incremental innovations do. Incremental innovations remain essential because they feed a continuous flow of new revenue streams, but they are insufficient, very insufficient. They do not ensure that a company will remain successful over the long term. Only disruptive innovation allows ...